In a widely anticipated (and much needed) move, the IRS has released Form 1023-EZ (Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code), detailed instructions to the form, and an equally detailed revenue procedure covering the form. Form 1023-EZ is generally available for U.S. organizations with assets of $250,000 or less and annual gross receipts of $50,000 or less.

Prior to this change, all nonprofits were required to file the full form 1023, which in some cases created a need for hundreds of pages of documentation and detail. To determine if an organization is eligible to file Form 1023-EZ, it must complete the Form 1023-EZ Eligibility Worksheet that is part of the form's instructions. An organization that answers "Yes" to any of the worksheet questions is not eligible to apply for exemption under Code Sec. 501(c)(3) using Form 1023-EZ.The following organizations are not eligible organizations and must use Form 1023 to apply for recognition of exemption under Code Sec. 501(c)(3):

(1) Organizations with projected annual gross receipts of more than $50,000 in either the current tax year or the next two years. (2) Organizations with annual gross receipts that have exceeded $50,000 in any of the past three years. (3) Organizations with total assets, the fair market value of which is in excess of $250,000. For purposes of this eligibility requirement, a good faith estimate of the fair market value of the organization's assets is sufficient. (4) Organizations formed under the laws of a foreign country. (U.S. territories and possessions are not considered foreign countries.) (5) Organizations that do not have a mailing address in the U.S. (territories and possessions are considered the U.S. for this purpose). (6) Organizations that are successors to, or controlled by, an entity suspended under Code Sec. 501(p) (suspension of tax-exempt status of terrorist organizations). (7) Organizations that are not corporations, unincorporated associations, or trusts. (8) Organizations that are successors to a for-profit entity. (9) Organizations that were previously revoked or that are successors to a previously revoked organization (other than an organization, the tax-exempt status of which was automatically revoked for failure to file a Form 990 series return or notice for three consecutive years). (10) Churches or conventions or associations of churches described in Code Sec. 170(b)(1)(A)(i). (11) Schools, colleges, or universities described in Code Sec. 170(b)(1)(A)(ii). (12) Hospitals or medical research organizations described in Code Sec. 170(b)(1)(A)(iii) or Code Sec. 501(r)(2)(A)(i), and cooperative hospital service organizations described in Code Sec. 501(e). (13) Cooperative service organizations of operating educational organizations described in Code Sec. 501(f)). (14) Qualified charitable risk pools described in Code Sec. 501(n). (15) Supporting organizations described in Code Sec. 509(a)(3). (16) Organizations that have as a substantial purpose providing assistance to individuals through credit counseling activities such as budgeting, personal finance, financial literacy, mortgage foreclosure assistance, or other consumer credit areas. (17) Organizations that invest, or intend to invest, 5% or more of their total assets in securities or funds that are not publicly traded. (18) Organizations that participate, or intend to participate, in partnerships (including entities or arrangements treated as partnerships for Federal tax purposes) in which they share profits and losses with partners other than Code Sec. 501(c)(3) organizations. (19) Organizations that sell, or intend to sell, carbon credits or carbon offsets. (20) Health Maintenance Organizations (HMOs). (21) Accountable Care Organizations (ACOs), or organizations that engage in, or intend to engage in, ACO activities (such as participation in the Medicare Shared Savings Program (MSSP) or in activities unrelated to the MSSP described in Notice 2011-20, 2011-16 IRB 652). (22) Organizations that maintain, or intend to maintain, one or more donor advised funds. (23 Organizations that are organized and operated exclusively for testing for public safety and that are requesting a foundation classification under Code Sec. 509(a)(4). (24) Private operating foundations. (25) Organizations that are applying for retroactive reinstatement of exemption under sections 5 or 6 of Rev Proc 2014-11, 2014-3 IRB 411, after being automatically revoked. (26) Organizations that are identified or designated as terrorist organizations within the meaning of Code Sec. 501(p)(2).We love to help new non-profits get organized. You may even qualify for a reduction in our initial fees. Please give us a call at (307) 638-3170 if you have any questions or would like our help.